In the age of COVID-19, do we need the ACA marketplace, Medicaid and a COBRA subsidy?

As the nation awaits the potential passage of a multi-trillion-dollar bill geared toward easing the economic impacts of COVID-19, a looming question remains about whether government-funded COBRA subsidies will be included.

More than 5 million American workers have lost their employer-provided group health benefits as a result of unemployment or reduced work hours during the pandemic. This has created an unprecedented volume of Qualified Beneficiaries (QBs) for COBRA, the Department of Labor regulations that allow individuals and families to continue their group health coverage for a period of time by paying the full premium amount plus 2% to their previous employer.

COBRA and previous national emergencies

During past national emergencies or times of significant reductions in force by an employer, COBRA has factored largely into the post-group health coverage solution. Many employers include a COBRA subsidy in their severance arrangements to ease the financial burden of being laid-off, and the government has stepped in before as well, providing relief from payment deadlines during natural disasters (Hurricane Katrina and others) and even passing the American Recovery and Reinvestment Act of 2009 (ARRA), which subsidized up to 65% of COBRA premiums for workers laid off during the Great Recession. The ARRA subsidy resulted in a COBRA enrollment increase up to 10% over pre-ARRA enrollment rates.

One would expect the level of COBRA enrollment to increase dramatically during COVID-19, too, but so far that appears not to be the case. What’s different this time? In 2020, we have Medicaid and the Affordable Care Act (ACA) marketplace as viable options. The whole intent of the ACA was to create an affordable solution for receiving health coverage, which is what many families need now, and both the marketplace and Medicaid could possibly offer premiums (or subsidized premiums) far below the COBRA premium + 2%. Because of this, the U.S. may see a significant uptick in marketplace and Medicaid enrollment and minimal to no change in COBRA enrollment.

Weighing your options

Although the ACA was touted as a one-stop solution that fits everyone’s needs, we’ve realized that is not necessarily the case. We learned with the implementation of the ACA that COBRA did not disappear as a coverage option. Nothing to support that has changed except the high number of uninsured individuals right now. Therefore, individuals and families must do their research before enrolling in marketplace coverage, Medicaid or COBRA, and determine which is the best fit. Start with the following questions:

• If you had a high-deductible health plan through your employer, did you already meet the annual deductible? If yes, then it may make sense to elect COBRA at least for the remainder of the year to take advantage of fully covered services.
• If you have specific providers you must see or conditions you must address, can these same providers and coverages be accessed on a marketplace or Medicaid plan? If yes, those two plans may be the more affordable option. If no, it could be a more appropriate decision to elect COBRA.
• Will your loss of coverage be temporary, with a re-employment and re-enrollment in the near future? If yes, the simplest and fastest solution may be electing and paying for COBRA for the short period of time.

Considering the above, we can’t expect the marketplace and Medicaid to be the only sources of insurance coverage during one of the worst health crises in U.S. history. In addition, a lack of understanding around all options – COBRA, the ACA marketplace and Medicaid – risks leaving many families uninsured and placing an economic burden on the country and insurance providers. A government subsidy could encourage people to pursue COBRA coverage who otherwise wouldn’t.

All of this brings us back to the initial question: Are COBRA subsidies really needed during this national emergency?

To me, the obvious answer is yes.

Health insurance coverage is not one-size-fits-all, and every option is needed at this critical time. With the risk of illness higher than ever, our government needs to respond by implementing a COBRA subsidy, like the one proposed by Senator Steve Daines (R-Montana), for a period of time to assist impacted families could make it the simplest, most affordable solution for many.

If you want to learn more about COBRA and the Alegeus platform, contact us.

Kris Saunders has worked in the COBRA space for more than 30 years, including a role as vice president of operations for WageWorks during ten of those years. She currently works in consumer solutions for Alegeus. Kris is certified as a CFCI, CAS and SPHR.